CDB Change to Lending Policy

English coverage of the shantytown renovation policy change.

Reuters: China Development Bank tightens approvals for property redevelopment programme
China Development Bank (CDB) has halted funding for new shantytown redevelopment projects, and has transferred approval authority from its local branches back to the policy bank’s headquarters, a source at the bank told Reuters late on Monday.

The source said new funding is being reined in due to concerns about risks associated with rising debt for local governments, the primary recipients of the loans used to fund shantytown redevelopment.

Existing projects are operating normally, said the source who spoke on condition of anonymity.

“Authority to approve shantytown redevelopment projects and sign contracts used to be at the branch level...But that has all gone back to headquarters now,” the source said.
“Overall, we think that CDB may tighten the approvals of new shantytown redevelopment projects,” analysts at Guotai Junan Securities said in a note on Tuesday.

“As a result, 2018 housing sales in lower tier cities are expected to be lower than our previous expectations”, the analysts said, although they expect demand for homes to stay strong.
There's nothing new here that wasn't covered in the Chinese articles I posted here: Updated: China Development Bank Cuts Off Funding for Shantytown Renovation

China was boosting housing demand by bulldozing existing homes. If it stops lending money for bulldozing efforts by local governments, then home sales will fall. Assuming there was some real substandard housing at the outset, but now it is likely the case that governments were in full blown broken windows mode, knocking down existing housing either to "create" GDP growth. The end result of which is an economy that cannot finance the rising level of debt.

No comments:

Post a Comment